Auto Industry Bailout

[shawnandangel]

I'm curious to see what all the mama's here think of the proposed 25 billion bailout for GM,Ford and Chrysler.
Here are my thoughts: This is America and we are a democratic society. Everyone has equal opportunity (to an extent, we're getting there!). Some businesses succeed and others fail. I believe we are on a slippery slope bailing out every large company that might potentially fail.

In recent years while Honda, Nissan, and Toyota were all developing fuel efficient cars, Ford GM and Chrysler still focused on making huge gas guzzlers. The 25 billion that they want was put aside in loans for them previously to help them develop fuel efficient cars.

So, if they get this 25 billion for more "immediate needs", then how are they going to develop the fuel efficient cars they need to compete?
here are some links

I also don't like the "it doesn't hurt to try" attitude that some people in congress seem to have. Yes it does hurt to try! It hurts the American people! We are the ones who are paying for all of this! So, if you're going to try, IMO you better be darn sure it's going to work!

http://news.yahoo.com/s/ap/20081117/ap_on_bi_ge/auto_bailout;_ylt=AmHv03EMrYqqDqUh1GvC7KYXIr0F

http://news.yahoo.com/s/bloomberg/20081117/pl_bloomberg/ajgjpdqvlskc;_ylt=Aidp7Wgsv6ukbuTnAvw8tD1v24cA

I don't want thousands of people to lose their jobs and my heart goes out to them, but I just don't know how many times we should bail out these companies for their bad management.

On the other hand, it has been reported that if these companies fail, it will cost the government 200 billion in aid to states.

I would like to see what others think.

[o_mom]

I haven't dug into the details at all, but my initial reaction is :shake:.

They have been over producing and overselling for years. Ask anyone who has tried to unload a used one of their cars - the depreciation is insane because there is so much inventory. Couple that with the rising gas prices which are pushing people out of the SUV gas guzzlers and it was no shocker.

Honda and Toyota are doing just fine because they build quality reliable cars that don't suck gas.

[TonFirst]

Good discussion - and there's more to discuss than just the kinds of cars they were designing and manufacturing. Factors including healthcare, pensions, and unions are all critical to this equation.

[bluestarfish18]

Shawnandangel,

I completely agree. While I may be in the only blue dot in family, I'm pretty upset that taxpayers are bailing out what seems like everybody now. I understand the need to help our nation's companies, but I also agree that this may be the tip of the iceberg for bailing out companies. Who will we bail out next? Maybe if these auto companies kept more employees in-country and not so many imported parts/exported jobs, I would be more supportive of them.

I know this is probably ignorant, but I still don't see why the big CEOs can't get off their pedestal, lower their own bonuses and paychecks, and help out their employees, which would pass onto the rest of America. Can someone please explain that one to me?

We recently purchased a truck, and I swear they were hurting so bad they were 1 step from giving it to us for free.

[mommylamb]

I'm a dem, but I'm also having a hard time supporting this one. I would be more inclined to if I saw a plan for how a bailout would allow them to turn things around, but I don't. It seems like it's just putting off the inevitable with our children's money. But, I do feel really badly for all those people who would lose their jobs because there aren't a lot of options for them. Then again, I'm not lining up to buy an American car.

[Davids-Coco]

I don't like this... There are many reasons why large companies and small companies alike fail. However, it all pretty much comes down to overextending. My father has had small businesses since I was 3. Times got tough, he took pay cuts to keep his employees employed, sold the business when he had to, and generally took responsibility. I know small and large are different but it seems like someone needed to step up at some point and take some responsibility IMO. Or at least someone needed to have some financial foresight.

It also makes me wonder about how much government is too much. Bailing out the car companies and creating a "car czar" position seem to encroach too much into the private sector to me. I wonder what would be next.

[lovin2shop]

I have conflicting thoughts on this issue. A huge part of the problem is that they can never be competitive while under the thumb of unions. They literally cannot stop production on existing models even when inventory is spiraling out of control and it takes them *years* to make changes to their line ups because of union demands. They also can't get out from under the pension and benefit requirements. This will probably never change. So, the question is, do you bail them out in hopes that it gets them through the tough times and it prevents things from getting harder for all of America? Or do you let them fail to get out from under this faulty business model and have the entire economy deal with the consequenses? It is essentially the same theorectical argument as the mortgage industry bailout, help those that don't deserve it to prevent harming everyone else?

[schums]

I don't post a lot any more, but I need to reply to this one. I live in SE Michigan where the auto companies are based. We NEED this bailout/loan/whatever you want to call it. It is not just ONE auto company, it's all 3. And it's not just thousands of jobs, it HUNDREDS of thousands of jobs (GM alone has 335,000 employees). Not to mention the MILLIONS of retirees (again GM alone has 800,000 retirees) depending on these companies for pensions and health insurance. The cost to the taxpayers to support these people would probably WAY exceed the $$ being proposed. Way more people are affiliated with the auto industry that you can ever imagine, and one or three of them going down will literally cause economic choas in this part of the country (the midwest). The midwest is no less deserving of federal money that the East Coast (the Wall Street bail out).

While I generally agree that the big 3 dug themselves into the hole they are in, believe it or not, they are trying to dig themselves out. Reliability and safety are close or on par in many instances with their Japanese rivals. They are working on more fuel efficient cars/trucks, and have invested heavily in alternative fuel research. Everyone here IS "sucking it up" to try and fix the issue. Even the UNIONS have taken concessions (lots recently), pay cuts, reduction in benes, you name it. We haven't had a raise in several years, and this is VERY common here.

I guess I just don't understand why AIG, etc. got $100s of billions in bailout, and people are upset about a fraction of that coming to an industry and region that desperately needs it. It can be easily argued that the financial industry caused their own problems, and no one seemed to bat an eye at the idea that that industry should be allowed to contract or simply go away.

If you look at it from a strategic viewpoint, this country cannot afford to let the domestic auto companies fold and go under. Historically, these were the factories that were easily and rapidly converted to war time production when this country desperately needed it. I sincerly doubt that in a time of war, Toyota or Honda would be first in line to have their plants turned into tank/jeep/plane production.

[happy2bamom]

I live in Michigan. Most of my friends (or their husbands) have jobs that are somehow tied to the automotive industry. I have never known so many people (personally) going into foreclosure, losing their jobs, or worried that they could lose their job at any moment. I know that the econony is awful right now, but in my little world it seems like Michigan is worse-off than most.

That being said, I don't think that a government bail-out is the answer. I also don't think that it was the right thing to do with AIG. Let me preface this by stating that I don't have a business degree, or much understanding of the business world. To put this in terms of family-life, something I know, it seems like the CEOs of these companies are the parents. They are suppose to make choices for the good of the company and its employees, including being good stewards of all money. Because the CEOs didn't do their jobs correctly, they want their parents (the government) to come bail them out, wipe the slate clean and take no personal responsibility. The ones who actually get hurt in all of this are the (kids) average employees. They are losing their jobs and homes. I haven't heard of any of the CEOs, or higher-ups worried about losing their homes or worried about finding money to feed their families.

I agree with a PP. I think that before any discussions of a bailout are discussed, the CEOs and higher-ups should define what personal sacrifices they are willing to make (pay cuts, bonus cuts, etc.).

[schums]

The problem is that if they kept jobs/parts/maufacturing in-country, the vehicles would cost even more than they already do. More people here = more union members = more $$, benefits, pensions, etc. The big three are unionized, which means they can't open a plant here without the UAW being in there. Hence the additional costs. Toyota/Honda/Mercedes/etc. are not union shops here, so they have more flexibility.

And FTR, the majority of parts and cars made by the big 3 are still made in the States. This is part of the problem of letting them die -- the vast numbers (millions) of people employed by the supplier base. The supplier base dwarfs the numbers of actual employees in the big 3, and they would pretty much all be out of business too.

[egoldber]

I see this more as a bailout of SE Michigan. My ILs live in Detroit and while they are personally OK, the lives of everyone who lives there is affected in some way by the auto industry. I just don't see how we as a country can let the Big 3 fail without expecting to deal with a HUGE fallout in that region. There is already so much despair and economic crisis there. It's so sad. :(

[lovin2shop]

I live in Michigan. Most of my friends (or their husbands) have jobs that are somehow tied to the automotive industry. I have never known so many people (personally) going into foreclosure, losing their jobs, or worried that they could lose their job at any moment. I know that the econony is awful right now, but in my little world it seems like Michigan is worse-off than most.

That being said, I don't think that a government bail-out is the answer. I also don't think that it was the right thing to do with AIG. Let me preface this by stating that I don't have a business degree, or much understanding of the business world. To put this in terms of family-life, something I know, it seems like the CEOs of these companies are the parents. They are suppose to make choices for the good of the company and its employees, including being good stewards of all money. Because the CEOs didn't do their jobs correctly, they want their parents (the government) to come bail them out, wipe the slate clean and take no personal responsibility. The ones who actually get hurt in all of this are the (kids) average employees. They are losing their jobs and homes. I haven't heard of any of the CEOs, or higher-ups worried about losing their homes or worried about finding money to feed their families.

I agree with a PP. I think that before any discussions of a bailout are discussed, the CEOs and higher-ups should define what personal sacrifices they are willing to make (pay cuts, bonus cuts, etc.).

Idealistically, I agree with you. Practically, not so much. Had AIG failed, many, many other companies would have been absolutely rocked. The Lehman failure showed how closely many of these financial companies are tied and there would have been chaos if AIG went under. People get frustrated that "Wallstreet" was bailed out. Well, I'd venture to guess that 99% of us rely on Wallstreet for our banks, retirement plans/brokerages, mortgages, car loan, credit cards, etc. So, in my opinion, this outrage is a little misplaced. The question to me, is if the Big 3 go under, who else do they take down?

[Moneypenny]

I think the auto industry is selling us a false dichotomy of "you either bail us out or we fail". I agree that if they fail, it will be disastrous for the entire economy. I don't want them to fail. I think they ought to follow what many airlines did and file Chapter 11 bankruptcy and reorganize to financial solvency.

[lovin2shop]

I think the auto industry is selling us a false dichotomy of "you either bail us out or we fail". I agree that if they fail, it will be disastrous for the entire economy. I don't want them to fail. I think they ought to follow what many airlines did and file Chapter 11 bankruptcy and reorganize to financial solvency.

I think that the problem with this is that they would still need a capital injection from somewhere to reorganize. The banks just aren't willing, so that leaves private investors or the gov't. I think they have all gone down the Chapter 11 path before, not sure? I agree that this would be ideal, but not sure if it is a real possibility. I hope so.

[Davids-Coco]

It can be easily argued that the financial industry caused their own problems, and no one seemed to bat an eye at the idea that that industry should be allowed to contract or simply go away.

I agree that these problems were self created... but I think the reason why people don't bat an eye is basically because the companies getting the bail out money are FDIC insured (as far as my research can find). I see that as the same as us paying for insurance - we pay every month and expect it to be there when there is an accident (car, medical, home, etc). Now, if it were companies/banks that were not FDIC insured, that would be different.

[schums]

And if the auto industry fails, many, many other companies in the industry will fail. They are that closly intertwined. Suppliers, who employ MILLIONS more people that the auto companies, will go out of business. Many already are either in bankruptcy or very close to it. At some point, the American taxpayer is going to have to pay money out due to this issue. It will either be a loan/bailout or supporting the people who were directly affected by this. FTR, we are not just talking about manufacturing here. There are thousands of white collar people who will be out of a job with NO prospect of finding a new one. That's a lot of families losing their homes, insurance, savings.

[schums]

Would you buy a car from an auto manufacturer in bankruptcy? If you were a supplier, how likely would you be to send parts to a bankrupt manufacturer? My understanding of chapter 11 is that some debts can be waived under the reorganization, so which suppliers are going to get screwed in that scenerio? How about all the stockholders who could see their holdings worth nothing, because they are the lowest debtor on the totem pole? Then look at the unions. They will fight bankruptcy tooth and nail because the contracts could all be voided out. This is why they've been willing to take cuts and give-backs. And if the big 3 do go into backruptcy and the union contracts are voided by the courts, what do you think will happen in the plants? Would YOU buy a car made by a potentially disgruntled union employee? There are a lot of issues with bankruptcy that make it not the best answer all the time. We have two HUGE suppliers that have been in bankruptcy for YEARS and cannot get out because of debt issues and lack of credit. If you can't get credit, how do you run the business?

[infocrazy]

The question to me, is if the Big 3 go under, who else do they take down?

Ouch. I am going to believe that you were really asking and not just saying that it wasn't a big deal if they fold...

I live in Detroit and although I do not work in the auto industry, I can tell you that my company (a Fortune 500 company) would be majorly impacted by this across the country. In addition, the majority of businesses in this area from printing companies to to advertising to packaging companies to suppliers to trucking companies to daycares, schools, and restuarants, etc would be shut down. There is a lot more connected, particularly here in SE MI, than you would think... It would completely decimate this area and any area dependent on an auto plant or its suppliers for employment. People would have no job and not be able to sell their house to leave this area...the already high forclosure rate would be staggering...and probably impact the banks again...

I'm not sure if a bailout is the answer. I personally think that Unions are the bigger problem and like someone said the Big 3's inability to adapt quickly as a result. I don't know how to resolve this since I doubt we could just remove the unions but something needs to be done.

[mongo]

And if the auto industry fails, many, many other companies in the industry will fail. They are that closly intertwined. Suppliers, who employ MILLIONS more people that the auto companies, will go out of business. Many already are either in bankruptcy or very close to it. At some point, the American taxpayer is going to have to pay money out due to this issue. It will either be a loan/bailout or supporting the people who were directly affected by this. FTR, we are not just talking about manufacturing here. There are thousands of white collar people who will be out of a job with NO prospect of finding a new one. That's a lot of families losing their homes, insurance, savings.


The same discussions happened when the last Rover plant in the UK closed a year or so ago. The UK now has no domestically owned car company since they all went belly up. The government failed to bail them out. The UK has not collapsed or been unable to produce military hardware in case of world war III. Keeping domestic factories producing products no one wants is a mistake. Why can't GM, ford and chrysler close divisions and sell assets to their rivals, toyota, honda, and nissan? Get down to core business fundamentals.

chrysler is good at making two things, minivans and jeeps. Keep those and throw away the rests

GM is good at making pickup trucks and SUV's. concentrate on those and get into the alternative fuel business to make the most fuel efficient suv on the planet. Forget the volt and concentrate on fuel cells (Honda is not wasting time on stupid battery technology that won't work when you run out of battery power).

Ford is a global company with small cars that are great in Europe. Start bringing them over here and stop selling multiple versions of the same car (taurus, sable, marquis, ltd, town car).

If volkswagen can turn a profit with high german labor costs in Europe, GM should be able to do so here even with their unions. Start making a product the market wants and people will buy it.

[hez]

My dad retired from GM on Nov. 1-- one of the latest sets of white collar packages.

It stresses me out that his pension could disappear, but I don't know what the right answer is. I'm just glad Mom & Dad own their house & don't have any debt. Also glad that he didn't take the transfer to Detroit years ago, because one of them might actually be able to find a job where they live should it come to that.

[Fairy]

I don't know enough about this yet to make a concrete determination, but on its face, it seems to me that there are so many millions and millions of jobs at stake here that if they don't get a bailout, we'll be in worse shape than if they didn't. Again, jury's still out, but that's my initial reaction.

[kijip]

I don't know enough about this yet to make a concrete determination, but on its face, it seems to me that there are so many millions and millions of jobs at stake here that if they don't get a bailout, we'll be in worse shape than if they didn't. Again, jury's still out, but that's my initial reaction.

I agree. I still have mixed thoughts but this is a one that I keep coming back to.

[elektra]

I have been reading alot about this too, mostly because DH works for a foreign automotive company. I am biased because of DH, but it does not seem "fair" to bailout the domestics when foreign companies have found a way to operate, and manufacture cars here in the states. I read that some of the UAW union wages are $70 an hour and that some of the union contracts allow for full salary even after a layoff. It costs the domestics so much to make each car because of the union labor.
I also learned that it's not just the big 3 that would be affected, but all the suppliers, more so even (as PP's mentioned). So even DH's company would be affected if their same suppliers went under due to losing a big 3 contract or something. However, I do not think a bailout is the answer. What's to keep the big 3 and unions from just continuing on with their same practices that got things to this point? It seems to me that some kind of restructuring should have happened a long time ago.
Hopefully something can be worked out though because it I agree that it would be a disaster for all those people to lose their jobs, pensions, etc.

[Ceepa]

The auto companies need a serious overhaul (top execs, union problems, etc) but in the immediate future I support the Big 3 declaring bankruptcy as opposed to the bailout.

[schums]

The same discussions happened when the last Rover plant in the UK closed a year or so ago. The UK now has no domestically owned car company since they all went belly up. The government failed to bail them out. The UK has not collapsed or been unable to produce military hardware in case of world war III.

How does the UK produce large military hardware without manufacturing capacity? My guess is that that larger pieces (i.e. jeeps, personal carriers, tanks) are being produced by an allie (i.e. US?). I'm not saying keep the factories open *ONLY* for this, but I think this needs to be a consideration when discussing the inherent value of this industry.


Why can't GM, ford and chrysler close divisions and sell assets to their rivals, toyota, honda, and nissan? Get down to core business fundamentals.

chrysler is good at making two things, minivans and jeeps. Keep those and throw away the rests

GM is good at making pickup trucks and SUV's. concentrate on those and get into the alternative fuel business to make the most fuel efficient suv on the planet. Forget the volt and concentrate on fuel cells (Honda is not wasting time on stupid battery technology that won't work when you run out of battery power).

Ford is a global company with small cars that are great in Europe. Start bringing them over here and stop selling multiple versions of the same car (taurus, sable, marquis, ltd, town car).

So what exactly would Honda/Toyota/etc. want other than the items you've listed above? Why would they buy the "not good" aspects of our companies? And if the big 3 sell the "good" parts of the companies, how exactly would they "get down to core business fundamentals"?

I agree completely that the big 3 need to reduce their product offering and focus on what they're good at. Plus do R&D for alternative fuels (fuel cells among them). But in order to do that, they have to BE IN BUSINESS. And right now, it's going to take some help to keep them in busines to try and make these changes. You can't make the wholesale change that's needed over night, or even in a quarter. These are 100 year old companies, with an entrenched way of doing things. Change takes time, even when you're trying to push it throgh fast.

[mamicka]

The auto companies need a serious overhaul (top execs, union problems, etc) but in the immediate future I support the Big 3 declaring bankruptcy as opposed to the bailout.
:yeahthat:

I think this is a very bad path we're going down. I don't support this bailout nor do I think the "wall street" bailout was a smart move. I don't think that this will be a happy ending whether the bailout happens or not. But I think that without a bailout the auto industry might actually be forced to come back/restart successfully. It won't be pretty & I really feel for those who are affected by these failures the most, but that doesn't make the bailout the right thing to do.

[schums]

I am not a union sympathizer AT ALL, but they have been MUCH more resonable over the last year or so. The unions have agreed to all sorts of changes to the contract to help alleviate some of the pressure on the auto makers. The $70 an hour figure is a fully loaded cost, meaning it includes things like health insurance and pension (if they're eligible). That's not what the union folks are taking home.

Unfortunately, unions are a way of life. Once they are in a plant/company, you cannot legally get rid of them. And most of the states that have big 3 plants are NOT right to work states. You must join a union if there is one present in the plant you work in. The big 3 cannot change this fact, nor can they force a contract on them that the union doesn't approve. This is why the union trie so hard to get into one plant (organizing vs. Toyota in the South) or store (Wal-mart). Once they get in, they are there to stay. Foreign manufacturers have been fortunate that their plant people have decided NOT to unionize.

The foreign maunfacturers have a MUCH lower cost to operate in the states since they don't have to worry about the unions. That's just the way it is. Also, the foreign manufacturers have much fewer people working in the states, therefore they have a much lower cost associated with health insurance, pensions, etc. In their home countries, these costs are borne by the government (untimately the people). Here, the big 3 foot this bill without assistance.

And as for it being "fair", the Japanese government (on more than one occasion) has "helped" it's auto industry out, too.

[maestramommy]

I'm really torn. I hate the idea of bailing out the big 3 because it seems like *most* of their troubles came from making huge gas guzzlers that don't endure. Even my cousin, who's Dh works for Chrysler (until the end of the month) refused to buy any car from them because they're just not reliable.

OTOH, Dh works for a company that supplies sensors to auto manufacturers, and they have already been impacted. Although no layoffs are imminent, Dh does feel that as a recent hire who isn't directly tied to any current projects he'd be a likely candidate to axe, should it ever get to that point. Even though his company supplies Japanese and European companies as well, American companies are a big piece of their income. This was something I didn't want to hear right now, given that we just picked up stakes and moved clear across the country, AND bought our first house, but what can you do?

Also, I've been hearing about the situation in MI and it's just grim. The auto industry has always had its ups and downs, but it's never fallen this far down, this fast. There are entire neighborhoods that are totally vacant, no one's house is selling, not even at a substantial loss.

[schums]

Just to give you an idea of how bad the housing is here, we just got the 2009 foreclosure list with the paper this weekend (required to publish it by law), and it's 138 pages long, in itty bitty classified ad size print. And it's just for the COUNTY we live in. There are 3 counties in this area that are equally affected.

[hellokitty]

Would YOU buy a car made by a potentially disgruntled union employee?

Um, I live in a town with a GM plant. The union workers here abuse the system as much as possible, it is absolutely disgusting. These are not stories I have heard from other ppl, these are stories I have heard from ppl who work at the actual GM plant and I even know GM workers who don't even LIKE GM cars. I think that says a lot, they know that their own products suck!

The union workers already put out a crappy product w/o being, "disgruntled," crappy quality is just their, "norm" as far as I am concerned. So, why does it matter what kind of car a potentially disgruntled union worker may put out? They already put out a bad product, it's not like bailing them out will suddenly motivate them to start making a higher quality product. They will just go back to doing things they way they have always done them and think that they can get away whining like a bunch of babies, b/c they dug their own hole. If they made high quality cars to begin with, maybe they wouldn't be in the this situation to begin with. I have absolutely NO sympathy for the GM, Chrysler or Ford. They have not evolved with the times, they are stuck in their rigid ways, and now they expect the rest of US to bail them out? No way. BTW, I am a fan of Japanese cars. I will gladly buy an American car when one of the big three finally figures out how to make one that doesn't stink! The big three have earned their infamous reputation for putting out poorly built cars. Consumers are not stupid, we will buy whatever car that we think is better and more reliable. It is really crazy to me that b/c of their own stupidity, everyone else is now supposed to just suck it up and bail them out?

IF they get a bailout I hope that ALL employees of these companies take a pay cut. Everyone else in the US is hurting right now too with the poor economy (I'm in OH, we're like 2nd in foreclosures in the country). You don't see the rest of us getting any kind of bail out. It just ticks me off that the big three feel that they are entitled to this. FWIW, I didn't agree with the bail out of the financial sector either.

[s7714]

I'm very annoyed with all the bailouts, but I have to admit I'm a bit torn about the GM one as a large number of DHs family used to work or still works for GM.

[Fairy]

Workers everywhere are disgruntled. I'd buy a car made by union labor that was disgruntled (again, still ... not blaming them or choosing a side; I'm disgruntled, wouldn't you like to be a pepper, too?). But I would not buy a car from a company that was in bankruptcy.

[lovin2shop]

Ouch. I am going to believe that you were really asking and not just saying that it wasn't a big deal if they fold...

I

To clarify, I meant that if the Big 3 went down, how many other companies would fall with them? What would the ultimate impact be to all Americans? I don't like the trend of government bailouts, but I know that had there not been a bailout of the financial sector, we would all be in a world of hurt. With the number of jobs that seems to be at stake in the auto industry, I'm leaning towards it being a systemic problem also, but I'm not 100% certain in my stance on this one.

[mongo]

How does the UK produce large military hardware without manufacturing capacity? My guess is that that larger pieces (i.e. jeeps, personal carriers, tanks) are being produced by an allie (i.e. US?). I'm not saying keep the factories open *ONLY* for this, but I think this needs to be a consideration when discussing the inherent value of this industry.



So what exactly would Honda/Toyota/etc. want other than the items you've listed above? Why would they buy the "not good" aspects of our companies? And if the big 3 sell the "good" parts of the companies, how exactly would they "get down to core business fundamentals"?

I agree completely that the big 3 need to reduce their product offering and focus on what they're good at. Plus do R&D for alternative fuels (fuel cells among them). But in order to do that, they have to BE IN BUSINESS. And right now, it's going to take some help to keep them in busines to try and make these changes. You can't make the wholesale change that's needed over night, or even in a quarter. These are 100 year old companies, with an entrenched way of doing things. Change takes time, even when you're trying to push it throgh fast.


Other auto companies would buy the other assets for expansion and for cheaper incentivized plant locations (tax breaks, etc.) which can be retooled for their products. (i.e., better toyota prius, honda hybrids, fuel cell skunkworks, etc.)

I have visited GM and toyota factories in Ontario Canada you cannot comprehend the difference in manufacturing capability of the two companies. Compare Fred Flintstone with George Jetson. toyota has a factor that produces engines that is lights out -- no humans--. parts in, engines out. No need for a $70/hr workforce. The fact is that GM cannot be reformed.

As far as military hardware, GM produces the US humvees that until recently "could not quickly or profitably be armored". Is this the company that produced the sherman tank by the thousands? At a time when other vehicles weren't selling, why couldn't GM "find the capacity" to speed up production of humvees desperately needed in the field. The logic that Detroit will respond to its patriotic duty goes against the facts. Is this the patriotic employer we ought to revere? Maybe if the greedy ceo's at GM cut back production of yukon denalis and other junk boxes, we could have saved lives.

[infocrazy]

Just to give you an idea of how bad the housing is here, we just got the 2009 foreclosure list with the paper this weekend (required to publish it by law), and it's 138 pages long, in itty bitty classified ad size print. And it's just for the COUNTY we live in. There are 3 counties in this area that are equally affected.

I know! I couldn't believe it--it was actually more pages than the actual newspaper!

[mytwosons]

I used to live in SE Michigan and still have family there, so have been closely following the news. I've been listening to NPR while working and during one of the shows this morning, they mentioned the huge concessions the unions have made. I don't remember the exact figure or details, but the new factory hires will only be making $14/hr compared to their historically high wages.

On principle, I don't agree with any of the buyouts. But, the government has been interferring with business for some time. Think trade agreements, union laws, etc. If the auto industry fails, Michigan will be decimated and the cost to the federal governemnt will be much higher than $25B. I've heard that 1 of every 3 people in the US would somehow be affected.

[niccig]

I've heard that 1 of every 3 people in the US would somehow be affected.

We'll be one of those. Our work is not related, but we have family in Detroit. DH and I have been talking, and we think we'll need to help out at some point. DH's parents are retired, but their house is worth what they bought it for 20 years ago, and their retirement fund has taken huge hit like everyone else. BIL works for GM, and if he loses his job, they'll lose their house. DH thinks we may need to help if that happens, as we're better placed to help than MIL/FIL on a fixed income. I don't think Christmas will be very cherry in Detroit this year.

[schums]

I have visited GM and toyota factories in Ontario Canada you cannot comprehend the difference in manufacturing capability of the two companies. Compare Fred Flintstone with George Jetson. toyota has a factor that produces engines that is lights out -- no humans--. parts in, engines out. No need for a $70/hr workforce. The fact is that GM cannot be reformed.

Thanks, but I'm not quite that naive or stupid. I can comprehend the differences.

GM has legacy work force issues that I guarantee Toyota does not. I don't think YOU comprehend that. Toyota can come in and build a factory that doesn't use people. Who's going to yell and scream and shut down their OTHER factories that do NEED to use labor? GM CAN be reformed. It just will not be overnight, like some folks seem to think it should be.

[mytwosons]

GM CAN be reformed. It just will not be overnight, like some folks seem to think it should be.

Yes! I think people often forget what a giant these companies are and how much slower it takes a large ship to turn.

I don't think anyone feels that the companies haven't made huge mistakes, but they are taking substantial steps to change their ways. They do need time for those changes to help, though.

[mongo]

Thanks, but I'm not quite that naive or stupid. I can comprehend the differences.

GM has legacy work force issues that I guarantee Toyota does not. I don't think YOU comprehend that. Toyota can come in and build a factory that doesn't use people. Who's going to yell and scream and shut down their OTHER factories that do NEED to use labor? GM CAN be reformed. It just will not be overnight, like some folks seem to think it should be.


I didn't imply you were stupid, but a little too optimistic in your evaluation of a company that no one wants to invest in. As a taxpayer I don't believe I should be forced to invest in a company I would not otherwise invest in as a privat citizen. I thought that was the reason why we couldn't have our social secutity checks investin in the stock market?

All of a sudden government has great faith in business that they are going to blow the unfunded social security trust fund (that's not in a lock box) into failed companies?

GM has had 3 decades to bail itself out. Chrysler already was bailed out in the 1980's and look at it today? Even Daimler didn't want it. If after 3 decades and one bailout later chrysler still couldn't get its act together why would you throw good money after bad!!!

I don't think America expects GM to turn on a dime. But decades later I think they expected more.

The definition of insanity is doing the same thing over and over again and expecting a different result. I believe this bailout is therefore insane.

[emily_gracesmama]

I hate the thought of more people being out of work, but I shudder to think of what these bailouts mean for our kids, in terms of the taxes that will be needed to pay for them. Part of me thinks this is natures way of cutting back on oversupply. Do we honestly need so much darn choice in cars? I am truly frightened to have another child considering the financial state of the world and we are in what would be considered an exceptional financial state by most standards. I am just one of those overly concerned and cautious individuals. I work in the financial industry and I was discussing this issue with a fellow worker how I don't want to have a 3rd child for fear of the state of the world and how much worse of the world will be if that thought begins to prevail, when we will need more people in the generation being born to bear the taxes that will be needed to pay for this mess. But then again, I think it probably takes an extremely rational/cautious person to think that way and if there were more rational people in the world, so much crap probably wouldn't have gone down like it has.

[KBecks]

The automakers have hugr retiree benefit costs that are bleeding them dry. GM has like 6 retirees for every worker, benefits paid they can't afford. Other co's don't have these burdens, the bailout won't work.

[KBecks]

I have been reading alot about this too, mostly because DH works for a foreign automotive company. I am biased because of DH, but it does not seem "fair" to bailout the domestics when foreign companies have found a way to operate, and manufacture cars here in the states. I read that some of the UAW union wages are $70 an hour and that some of the union contracts allow for full salary even after a layoff. It costs the domestics so much to make each car because of the union labor.
I also learned that it's not just the big 3 that would be affected, but all the suppliers, more so even (as PP's mentioned). So even DH's company would be affected if their same suppliers went under due to losing a big 3 contract or something. However, I do not think a bailout is the answer. What's to keep the big 3 and unions from just continuing on with their same practices that got things to this point? It seems to me that some kind of restructuring should have happened a long time ago.
Hopefully something can be worked out though because it I agree that it would be a disaster for all those people to lose their jobs, pensions, etc.
:yeahthat:

USautomakers need to be able to break contracts and get people costs under control to be competitive and have a shot at survival. A bankruptcy followed by regrouping will hurt, but the automakers will be back in better shape, it's not like the assets will go away, Detroit will still make cars but the owners and processes will be different. It will hurt but it will come back better.

[mongo]

Yes! I think people often forget what a giant these companies are and how much slower it takes a large ship to turn.

I don't think anyone feels that the companies haven't made huge mistakes, but they are taking substantial steps to change their ways. They do need time for those changes to help, though.



Are these companies the "prodigal son" who squanders away his fortune on a life of idle complacency only to come groveling back to his father when he is destitute? Absolutely!!! However, we're NOT God!!! This is business and the fat and slow need to go out of business. It doesn't take 40 years and $25 billion to turn an aircraft carrier!!!!!!!!!! We already have failed organizations that are too big to fail...it's called GOVERNMENT! If you believe that we want companies run for and by the government, then lets raise the hammer and sickle and declare Michigan the first bolshevik republic of the poor United States of communist republics.

When times were good the big three never really made the changes needed to cure their huge retirement problems. They sat around like ostrich's with their heads in the sand developing stupid gimicks like OnStar instead of connecting it to a product that people want to drive.

[niccig]

The automakers have hugr retiree benefit costs that are bleeding them dry. GM has like 6 retirees for every worker, benefits paid they can't afford. Other co's don't have these burdens, the bailout won't work.

Ouch. I see our future when baby boomers retire and there are more retirees than people working and paying taxes.

[schums]

. . .you cannot comprehend the difference in manufacturing capability of the two companies.

Telling me this doesn't imply that I am naive or stupid? Wow, I guess I must have misunderstood the definition of "cannot comprehend". My father was responsible for BUILDING automotive plants. I guarantee you that I do, in fact, understand the technology available. Add on an MBA from a top 10 school, and trust me, I understand more than you seem to realize.

Chrysler wasn't "bailed out" in the 80's. It was given loan guarantees by the government (that they didn't need to use) which enabled them to get private financing at a time when it was difficult to get. And FTR, Daimler did more to hurt Chrysler than help. Chrysler was in better shape BEFORE the takeover than after. Yes, I have a VERY credible and well placed source.

And who says that "no one wants to invest" in GM? The reason the big 3 are asking for help (in the form of loans mostly) is because the credit crunch (caused by the group we already bailed out in NY) is severely impacting their ability to get financing.

As citizens, we don't get to pick and chose where our money is "invested" by the government. Some folks don't want their money "invested" in the military, but they can't opt out of that part of their taxes.

Obviously, you're pretty upset about this. Not quite sure why. Are you ranting like this about the Wall Street bail out?

[JTsMom]

I don't really know what to think in terms of the bailout, but the thought of all of those people losing their jobs is just mind-blowing. A lot of you know that my DH- a Toyota employee, mind you- was laid off about 2 months back. I can tell you from personal experience that it's not just the big 3, it's the entire auto industry that is hurting. Pepole we know in this industry all accross the country are in similar positions.

It's not just the manufacturing jobs- it's the dealership jobs too- sales, parts, service, etc. It effects us all. The credit crunch was a huge part of this. If you can't get credit, you're not buying a car. If you can't pay your mortgage, you're not getting your oil changed. If you aren't getting your oil changed, DH isn't selling the parts for said service. If DH doesn't have a job, I'm not out spending money at retail stores, etc.

I'm not a fan of the products the big 3 turn out, and I'm not saying that they don't have some serious problems that need addressing. I'm just saying it's not as simple as saying they shouldn't be making gas guzzlers.

[mongo]

Telling me this doesn't imply that I am naive or stupid? Wow, I guess I must have misunderstood the definition of "cannot comprehend". My father was responsible for BUILDING automotive plants. I guarantee you that I do, in fact, understand the technology available. Add on an MBA from a top 10 school, and trust me, I understand more than you seem to realize.

Chrysler wasn't "bailed out" in the 80's. It was given loan guarantees by the government (that they didn't need to use) which enabled them to get private financing at a time when it was difficult to get. And FTR, Daimler did more to hurt Chrysler than help. Chrysler was in better shape BEFORE the takeover than after. Yes, I have a VERY credible and well placed source.

And who says that "no one wants to invest" in GM? The reason the big 3 are asking for help (in the form of loans mostly) is because the credit crunch (caused by the group we already bailed out in NY) is severely impacting their ability to get financing.

As citizens, we don't get to pick and chose where our money is "invested" by the government. Some folks don't want their money "invested" in the military, but they can't opt out of that part of their taxes.

Obviously, you're pretty upset about this. Not quite sure why. Are you ranting like this about the Wall Street bail out?


The generation of whiners who wants these bailouts thinks nothing of the generations they leave behind. That's what makes me upset. The same people who bought the house they couldn't afford and wants me to bail them out makes me upset. The company that made themself so big they could not fail makes me upset.

Joe Biden spoke of fairness, but this is not fairness. This is simply robin hood.

No. I'm not happy at any of the bailouts, banks, homeowners, or otherwise.

The constitution mandates that the government support an army and navy. It does not say the government be a shareholder or financier in GM, Ford, Chysler.

What is going to happen to the value of the currency when the government creates inflation by simply printing $700 billion? What will the value of those jobs be if the people still can't afford to live off their earnings? Is it good to give people jobs and deficit spend and saddle their children with no retirement or social security?

How much larger is the national debt going to be? Do we only live for the moment and make knee jerk reactions? I don't see any long term thinking in all of this. How will saving GM in the short term get them out of their retiree crisis? From my recollection, GM/ford/chrysler shares were plunging long before the credit crunch.

[egoldber]

The generation of whiners who wants these bailouts thinks nothing of the generations they leave behind. That's what makes me upset.

Actually I'm thinking more about the generation that went before. Of all the hundreds of thousands of older Americans on fixed income who rely on their automotive pensions to be able to eat and pay their heating bills. If GM goes belly-up, who is going to pay those pensions?

And what about the economic collapse of an entire state? What is the social fallout if no one steps in to prevent it? I don't think it's possible to overestimate the catastrophe that would be Michigan (and other automotive reliant areas) if that happens.

[mytwosons]

Are these companies the "prodigal son" who squanders away his fortune on a life of idle complacency only to come groveling back to his father when he is destitute? Absolutely!!! However, we're NOT God!!! This is business and the fat and slow need to go out of business. It doesn't take 40 years and $25 billion to turn an aircraft carrier!!!!!!!!!! We already have failed organizations that are too big to fail...it's called GOVERNMENT! If you believe that we want companies run for and by the government, then lets raise the hammer and sickle and declare Michigan the first bolshevik republic of the poor United States of communist republics.

Um...WTH? Nowhere did I imply that communism is the answer. Give me a break. I stated I agreed that government should stay out of business, but given that they have been involved via trade, unions, etc., the "perfect state" of no government intervention doesn't exist in our reality.

Try to have some empathy for people living in MI and/or involved in the auto industry. These are well educated people who will lose everything, and never thought they'd be in this position.

Consider that the auto industry is far reaching. Think of all the suppliers going under and all the companies that have one of the autos or OEMs as clients. The estimates are the unemployment rate will be above 11%. There will be no quick fix for that many people out of work.

Sarah (schums), my MBA is also blue!

[schums]

The estimates I've heard is that the auto industry ratio of big 3 employees to suppliers is 1:3. So figure there's about 800,000 big 3 employees (worldwide), that's a 2.4 MILLION supplier employees. Total number of people affected by the big 3 going down: 3.2 MILLION. Not to mention the millions more retirees, and "collateral damage" (retail stores, restaurants, schools, day cares, etc.). Could be VERY ugly!

[KBecks]

Actually I'm thinking more about the generation that went before. Of all the hundreds of thousands of older Americans on fixed income who rely on their automotive pensions to be able to eat and pay their heating bills. If GM goes belly-up, who is going to pay those pensions?

And what about the economic collapse of an entire state? What is the social fallout if no one steps in to prevent it? I don't think it's possible to overestimate the catastrophe that would be Michigan (and other automotive reliant areas) if that happens.

I'm no economist, but I'm wondering if the government wouldn't be better off helping the big 3's retirees after the fallout than helping the auto co's themselves. GM has >500,000 retirees. Wouldn't all of them already be receiving social security in addition to their pensions? It seems there would be enough to live on, although the GM benefits look like a sweet deal overall, yes a lot of that would go away.

A bankruptcy won't be the end of the automotive industry in America. Americans will still buy cars, still need cars, and companies here will built them. It's just that the ownership of those companies may change, the operations of the companies will change, and things will be different. I have no doubt that cars will still be made in Detroit -- probably fewer cars, probably fewer jobs, and the whole thing will become leaner, it will be tough for a while, but things will come back.

I think of when KMart declared bankruptcy and then turned around and bought Sears for goodness sake. KMarts didn't go away, some stores closed, etc. but life went on.

The parts manufacturers, suppliers and dealers will all still exist in the big picture.... some will go away, some will change, etc. etc. but there is no doubt Americans will still buy, use and make cars.

I say let the market do its thing and provide some funding to help the transition instead of a bailout.

[schums]

When K-mart went into bankruptcy and "bought" Sears, they screwed ALL their shareholders. They reincorporated and all the outstanding shares of K-mart were good only for toilet paper. They also moved to Chicago and laid off/fired ALL their MI people (they used to be based here too). In reality, it was Sears buying K-mart, but legally it was done the other way around.

As for people losing their pensions that they worked for 20 or 30 years to get: that's real fair. Could you and your DH live on what social security provides? It really isn't all that much, compared to the cost of living in a lot of areas. It ain't cheap to live in Michigan, even though our economy sucks.

If the big 3 go bankrupt, where, exactly, will the market absorb almost a MILLION employees? And almost 3 MILLION supplier employees? You're right -- cars will still be made, in the big picture, some of them here. Things will get leaner (if that's possible). But you're still talking about a LOT of people who will be displaced. Where will they go, and what will they do? And if they "migrate" to where you live, are you prepared for the glut of skilled trade/professionals that will drive YOUR wages down? If you can't feed the kids, you'll work for cheap. This isn't just about the industry, or about Michigan. It WILL affect the entire economy.

[mytwosons]

A bankruptcy won't be the end of the automotive industry in America. Americans will still buy cars, still need cars, and companies here will built them. It's just that the ownership of those companies may change, the operations of the companies will change, and things will be different. I have no doubt that cars will still be made in Detroit -- probably fewer cars, probably fewer jobs, and the whole thing will become leaner, it will be tough for a while, but things will come back.


The parts manufacturers, suppliers and dealers will all still exist in the big picture.... some will go away, some will change, etc. etc. but there is no doubt Americans will still buy, use and make cars.

The suppliers have been under pressure for years from the auto companies as they looked to cut costs. Most of their margins are crazy slim. If one of the big three go into bankruptcy, the suppliers won't get paid for some of the parts they already supplied. The margins are so slim, the suppliers won't be able to survive not being paid by one manufacturer. If many of the suppliers go under, the cost of parts will go up due to limited supply, and we've got a continuing mess.

This is messy, complex situation with no easy answer. IMO, at this point, it's about limiting the devestation.

[mytwosons]

If the big 3 go bankrupt, where, exactly, will the market absorb almost a MILLION employees? And almost 3 MILLION supplier employees?

If these people are forced to leave the state for work, you can bet they will be walking away from their houses and mortgages. How is the financial market going to cover those losses? Another 750 B bailout?

I will admit to being irked that 25B for the autos is being shot down while 750B for wallstreet was passed pretty darn quick.

[vludmilla]

The same discussions happened when the last Rover plant in the UK closed a year or so ago. The UK now has no domestically owned car company since they all went belly up. The government failed to bail them out. The UK has not collapsed or been unable to produce military hardware in case of world war III. Keeping domestic factories producing products no one wants is a mistake. Why can't GM, ford and chrysler close divisions and sell assets to their rivals, toyota, honda, and nissan? Get down to core business fundamentals.

chrysler is good at making two things, minivans and jeeps. Keep those and throw away the rests

GM is good at making pickup trucks and SUV's. concentrate on those and get into the alternative fuel business to make the most fuel efficient suv on the planet. Forget the volt and concentrate on fuel cells (Honda is not wasting time on stupid battery technology that won't work when you run out of battery power).

Ford is a global company with small cars that are great in Europe. Start bringing them over here and stop selling multiple versions of the same car (taurus, sable, marquis, ltd, town car).

If volkswagen can turn a profit with high german labor costs in Europe, GM should be able to do so here even with their unions. Start making a product the market wants and people will buy it.

Well said and I agree with much of it. I tire of the unions getting the blame.

[lovin2shop]

A bankruptcy won't be the end of the automotive industry in America. Americans will still buy cars, still need cars, and companies here will built them. It's just that the ownership of those companies may change, the operations of the companies will change, and things will be different.

The ownership of the big three is through the stockholders, the vast majority of which are just average americans, not fat corporate executives.

[kijip]

The ownership of the big three is through the stockholders, the vast majority of which are just average americans, not fat corporate executives.

And a lot of municipalities and state pension plans.

Still mixed thoughts, but this has an impact FAR beyond just those 3 companies.

[KBecks]

When K-mart went into bankruptcy and "bought" Sears, they screwed ALL their shareholders. They reincorporated and all the outstanding shares of K-mart were good only for toilet paper. They also moved to Chicago and laid off/fired ALL their MI people (they used to be based here too). In reality, it was Sears buying K-mart, but legally it was done the other way around.

As for people losing their pensions that they worked for 20 or 30 years to get: that's real fair. Could you and your DH live on what social security provides? It really isn't all that much, compared to the cost of living in a lot of areas. It ain't cheap to live in Michigan, even though our economy sucks.

If the big 3 go bankrupt, where, exactly, will the market absorb almost a MILLION employees? And almost 3 MILLION supplier employees? You're right -- cars will still be made, in the big picture, some of them here. Things will get leaner (if that's possible). But you're still talking about a LOT of people who will be displaced. Where will they go, and what will they do? And if they "migrate" to where you live, are you prepared for the glut of skilled trade/professionals that will drive YOUR wages down? If you can't feed the kids, you'll work for cheap. This isn't just about the industry, or about Michigan. It WILL affect the entire economy.

It is affecting the entire economy -- the auto industry is huge, but it is not going away. It will survive but it will be different.

There will be losses no matter what. GM stock is already tanking. Mutual funds and pension plans that are invested in GM stock have diverse portfolios. It sucks to lose money but that is part of the risk of investing in stock to begin with. That's why portfolio managers diversify to reduce overall risk.

I'm not familiar with what social security provides but I think that it's not bad, and I'd rather see the US government potentially give extra money to retirees and assistance to workers than to bail out the automotive corporations when there's no evidence that the automakers can be successful.

I'd rather see economic aid to the state of Michigan and perhaps lending to stimulate business in Michigan than corporate assistance.

And I'd like to get a clearer picture of what the aftermath of a bankruptcy would be. I tend to think that it's not total devastation, that the automakers would re-group and that the automotive industry will continue.

As for the suppliers, I believe many of the automotive suppliers (to manufacturing) are enormous companies themselves. It will be rough but that will be temporary, maybe a few years. OK, some costs go up, it's not the end of the world. Automakers need suppliers, the businesses will still exist.

[KrisM]

I don't post a lot any more, but I need to reply to this one. I live in SE Michigan where the auto companies are based. We NEED this bailout/loan/whatever you want to call it. It is not just ONE auto company, it's all 3. And it's not just thousands of jobs, it HUNDREDS of thousands of jobs (GM alone has 335,000 employees). Not to mention the MILLIONS of retirees (again GM alone has 800,000 retirees) depending on these companies for pensions and health insurance. The cost to the taxpayers to support these people would probably WAY exceed the $$ being proposed. Way more people are affiliated with the auto industry that you can ever imagine, and one or three of them going down will literally cause economic choas in this part of the country (the midwest). The midwest is no less deserving of federal money that the East Coast (the Wall Street bail out).

While I generally agree that the big 3 dug themselves into the hole they are in, believe it or not, they are trying to dig themselves out. Reliability and safety are close or on par in many instances with their Japanese rivals. They are working on more fuel efficient cars/trucks, and have invested heavily in alternative fuel research. Everyone here IS "sucking it up" to try and fix the issue. Even the UNIONS have taken concessions (lots recently), pay cuts, reduction in benes, you name it. We haven't had a raise in several years, and this is VERY common here.

I guess I just don't understand why AIG, etc. got $100s of billions in bailout, and people are upset about a fraction of that coming to an industry and region that desperately needs it. It can be easily argued that the financial industry caused their own problems, and no one seemed to bat an eye at the idea that that industry should be allowed to contract or simply go away.

If you look at it from a strategic viewpoint, this country cannot afford to let the domestic auto companies fold and go under. Historically, these were the factories that were easily and rapidly converted to war time production when this country desperately needed it. I sincerly doubt that in a time of war, Toyota or Honda would be first in line to have their plants turned into tank/jeep/plane production.

I agree totally with this. I am also in SE Michigan. DH works for a Tier 1 supplier. It is not just the hundreds of thousands of people working for the Big 3 who will be affected, but the millions of people in SE Michigan and other places. DH's company is on credit watch already, even though historically they've been one of the best suppliers. Yes, they have international business, but a large chunk is the Big 3.

My neighbor works for Sysco - food company. She is greatly affected by the talk of bancruptcy as fewer people eat out and restaurants in Auburn Hills (Chrysler) are her zone. So, it's not just the auto industry who will suffer here.

My dad retired last year from Ford. My grandfather retired from GM and my grandmother retired for American Motors (now Chrysler). Each of them would be greatly hurt by the fall of these companies, as would millions of others.

[KrisM]

Idealistically, I agree with you. Practically, not so much. Had AIG failed, many, many other companies would have been absolutely rocked. The Lehman failure showed how closely many of these financial companies are tied and there would have been chaos if AIG went under. People get frustrated that "Wallstreet" was bailed out. Well, I'd venture to guess that 99% of us rely on Wallstreet for our banks, retirement plans/brokerages, mortgages, car loan, credit cards, etc. So, in my opinion, this outrage is a little misplaced. The question to me, is if the Big 3 go under, who else do they take down?

They take down the suppliers. They take down the local stores who no longer have people with income to shop there. I'm in SE MI and my neighbor's company, a restaurant food supplier, is hoping the bancruptcy doesn't happen, as they will hurt badly as fewer people go out to eat, etc.

[KBecks]

GM lost $4.2 billion in the third quarter alone.

I don't think a bailout will work. The money will get burned up, the business is flawed due to out-of-balance labor and legacy costs.

If the money would have a chance of helping, I'd support it. I feel it's like flushing it down the drain, it's a money hole.

This is not about energy efficient cars. I think American cars are quite good and still very popular in many parts of the country. American trucks and SUVs are hugely popular and there are energy efficient American cars. It's not a product problem at all, and having government try to say you need to build these kinds of cars has nothing to do with the core labor cost issues that are strangling the US automakers.

[hez]

GM has >500,000 retirees. Wouldn't all of them already be receiving social security in addition to their pensions?

No. My dad is 59-- not old enough for Social Security, but certainly old enough for GM to buy him out. He also had 41+ years in (all his GMI years count as years of service).

[JoyNChrist]

And a lot of municipalities and state pension plans.

Still mixed thoughts, but this has an impact FAR beyond just those 3 companies.

What she said. I still don't understand it all, and the whole thing leaves me with a nasty taste in my mouth...I'm just glad I'm not the one having to make the decision. This is a huge, far-reaching problem, and while the bailout may not be the best answer, my gut reaction is that it may be the only answer. And even then, I'm not sure it's more than a temporary solution.

It's a scary thing.

[elektra]

This is messy, complex situation with no easy answer. IMO, at this point, it's about limiting the devestation.

:yeahthat:

[egoldber]

off helping the big 3's retirees after the fallout than helping the auto co's themselves. GM has >500,000 retirees. Wouldn't all of them already be receiving social security in addition to their pensions? It seems there would be enough to live on

My mother now "lives on" 2/3 of my father's SS benefit. When he was alive they also received a "fat" union pension. Before his death, they lived on $1800 a MONTH. Now she lives on about $650 a MONTH. (My father retired 25 years ago and his benefit went up practically SQUAT while he was alive.)

Both my brother and I already supplement her income and pay for things like a broken furnace when it happens. She was recently in the hospital for pneumonia and we found out she had not been taking all of her meds for several months because she couldn't afford it. She lied about this to us because she was embarrassed.

And we help her as we can, but DH is losing his job next month. If neither of us can find something, we will reach a point where we may not even be able to help her. She is in her 70s and does NOT want to leave the (paid off) she has lived in for over 50 years although both my brother and I have BEGGED her to come live with us.

So no, SS is generally NOT enough to live on. Certainly not if you have prescription meds of any sort as most aging Americans do. Why do you think so many seniors are working at places like WalMart? (And competing for jobs with younger workers.) They HAVE to in order to be able to eat.

I don't know what the answer is. It is a scary, scary time. And I just hope that Washingon economists have some better idea than the likes of you and me to figure this stuff out.

[KrisM]

No. My dad is 59-- not old enough for Social Security, but certainly old enough for GM to buy him out. He also had 41+ years in (all his GMI years count as years of service).

Cool that GMI counts. I never knew that.

My dad retired from Ford at a few days before turning 59. He took the buyout about 1.5 years ago. He's 60 now and does not get any social security.

[o_mom]

What she said. I still don't understand it all, and the whole thing leaves me with a nasty taste in my mouth...I'm just glad I'm not the one having to make the decision. This is a huge, far-reaching problem, and while the bailout may not be the best answer, my gut reaction is that it may be the only answer. And even then, I'm not sure it's more than a temporary solution.

It's a scary thing.

I agree it is a huge problem and yes, it is beyond one or two problems. It is a systemic problem due to the way they have structured their business. I think shrinkage in these three is inevitable, just a matter of how or when.

It does feel like pouring money down a hole to just give them cash to keep doing what they are doing. They have had years to change and yet, they kept going at it the same way, so giving them $25B to keep things going is just putting the problem off another day. I haven't seen anything that says what they are going to do with the money other than just make payroll.

[mongo]

Um...WTH? Nowhere did I imply that communism is the answer. Give me a break. I stated I agreed that government should stay out of business, but given that they have been involved via trade, unions, etc., the "perfect state" of no government intervention doesn't exist in our reality.

Try to have some empathy for people living in MI and/or involved in the auto industry. These are well educated people who will lose everything, and never thought they'd be in this position.

Consider that the auto industry is far reaching. Think of all the suppliers going under and all the companies that have one of the autos or OEMs as clients. The estimates are the unemployment rate will be above 11%. There will be no quick fix for that many people out of work.

Sarah (schums), my MBA is also blue!


My business school training always taught me that you invest in projects with a positive net present value. What is the net present value of a $25 billion loan to the big 3?

Many countries in Europe have been dealing with high unemployment for years due to heavy government subsidy. That's what happens when your government rewards failure and invests to "protect" people from imports and competition.

During our national history industries were overtaken by other industries as technology changed. I don't hear about a shoe manufacturer bailout. Or where was the bailout for radio manufacturers when the Television was introduced? Or what about a bailout when Windows almost destroyed Apple computer?

This is simply a business cycle. Economic theory used to hold that recessions are a natural and good feature of capitalism because they weed out ineffective firms and replace them with better and stronger businesses. It seems now there is a caveat that when your business is too big those rules no longer hold. How hypocritical will America look to the rest of the world when we tell other countries to knock down their trade barriers to free trade as we subsidize our own industry.


It's unfortunate that people will have to be displaced, but that has always happened in America. People moved west when they coudn't work in the East. It doesn't appear that this problem is new or that such workers didn't know that the industry they worked in was in such a precarious position.

[egoldber]

If the education system in America was not just a baby sitting program for teenagers, our workers would be able to be employed in other areas. NY city spends over $8500/year educating people who cannot read. Why should such people expect to earn $70/hr because their father did? Honestly.

WHAT are you talking about?

Um, how are people in Detroit metro supposed to sell their homes and move when there is ALREADY a 2+ year glut of houses on the market? My ILs own their home in Detroit metro (neither is directly connected to the auto industry), but couldn't sell unless they did a fire sale of $100K for their $400K home. And even then, they may not even be able to sell it and might have to just walk away from it. These are not auto workers, FIL is a pharmacist (still working 60 hour a week shifts at CVS at age 78 because he can't afford to retire) and MIL was a teacher in the Detroit schools for 30 years.

This is a disaster in the making for Detroit and Michigan that is going to make Katrina's effect on New Orleans look like a gentle summer rain.


My business school training always taught me that you invest in projects with a positive net present value.

Ah yes, and all these MBAs on our deregulated Wall Street did such a good job.....oh wait, never mind.

[Moneypenny]

There is no satisfactory solution to this problem. There just isn't. A bailout won't work, it will just delay the inevitable. 18 months from now we'll be in the same situation and we'll have spent $25B to get there.

In order to turn things around, the auto companies need to cut costs and increase revenue. They can't cut costs in any significant way in the near future because the union won't let them reduce salaries and benefits, and they have shown no desire or ability to reduce supply/equipment/manufacturing costs. They can't increase revenue because people are only going to be buying what they need in this economy. They need to lower costs and sell vehicles people want, and they can't do that without first spending MORE to produce different vehicles.

At least one of the Big 3 will fail even with a bailout and the remainder will be significantly smaller than they are now. There is no way around it. I think the best thing is for the government to prepare as best it can to help the millions of people who will be affected.

[Ceepa]

This is a disaster in the making for Detroit and Michigan that is going to make Katrina's effect on New Orleans look like a gentle summer rain.

Detroit, and MI in general, are heading for even darker times. No doubt. This cannot be avoided at this point. A bailout isn't going to avert the trouble. But I wouldn't compare this to a natural diaster.

[KBecks]

The thing is that with such a huge business failure, it's gonna hurt a lot of people. It is emotional, stressful, scary.

You are right and I agree about not investing in failure and that recessions are good and natural cycles. I think of forest fires that make room for regrowth. ETA: The trouble with this situation is its enormity..... my dad sold steel in Wisconsin and said 15+ years ago that everything goes with Detroit, good and bad.

There needs to be some help for people affected. I think providing aid to people and incentives for new investment after a bankruptcy would be helpful.

There are massive assets in Detroit, I think there must be buyers. Who will take over truck and suv production? Someone will. And it should not be the US government.

At some point if the market runs naturally, buyers and businesses will come in and see great opportunities. There should be incentives. The problem is the very real pain people will face in the meantime.

I think it's very important though this is scary, that we are not making decisions based on fear but on reality. Change can be very difficult for people, even little changes can be extremely scary. Massive, drastic change is coming... it's going to be hard for people to accept, but survival is going to be about staying flexible and adapting to the new situations as they develop.

I'd love to read articles about what various economists are saying about the options and possibilities to come out of this, and predictions of what the paths and results might be. There are always options and it's going to be important for the feds and Detroit to look at this with clarity, practicality and a long term view.

ETA: I wonder if this situation will destroy the United Autoworkers. I can't see unionized auto manufacturing surviving. Yet, I can't imagine that the UAW will go away gently, especially when they have political influence that seems very significant. I think the bailout may happen, even if it's known it's a total waste and only buys a year of time, because of union pull.

I also wonder what post bankruptcy automaking would look like. Which brands will survive -- you know, like

[egoldber]

But I wouldn't compare this to a natural diaster.

Why not? We may not like as a country how Detroit got to where it is, but the outcome is the same. Homes become worthless. Thousands of workers and families are displaced and need help at a very large scale.

In fact, I think the government's response to Katrina is a pretty accurate picture of government's current capability of responding to a crisis of this magnitude. I only hope that the new government is able to change things on a structural level so that if the bailout does not happen (or worse I agree, happens and fails) then we can respond appropriately.

[Ceepa]

Why not? We may not like as a country how Detroit got to where it is, but the outcome is the same.

Yeah, there is a difference between business mismanagement and a hurricane. In origin and management.


In fact, I think the government's response to Katrina is a pretty accurate picture of government's current capability of responding to a crisis of this magnitude. I only hope that the new government is able to change things on a structural level so that if the bailout does not happen (or worse I agree, happens and fails) then we can respond appropriately.

Please explain how "the new govenrnment" could change things on a structural level and how "WE" can "respond appropriately".

[egoldber]

Based on what happened with Katrina, I think there is little disagreement that the government's repsonse was inadequate, unprepared and mismanaged. Our response to Ike was little better although less well covered in the news. I sincerely hope that the new administration will be able to make some changes that would streamline processes, etc. that would make a government response to a wide scale emergency (of economic or natural origin) more efficient and better organized.

By "we" I mean the American government, which last time I checked, was supposed to be by of and for the people. ;)

But I'm done. The cavalier "as long as it's not in my backyard and doesn't affect me" response of some to what could be an economic catastrophe of a scale that we have seldom seen just boggles my mind and for some reason just really got to me.

[Ceepa]

No one is saying that they want the good people of Michigan (or anyone else) to suffer, but this is a situation that cannot be avoided. And as some have said, it is arguable that is a natural turn of the business cycle (albeit an awful, destructive part). A bailout will not save anyone because it does not address any of the fundamental problems. And although bankruptcy will not "fix" the problems either, it will establish an orderly way of addressing and containing the mess and would bring fewer long-term drawbacks.

[supercalifragilous]

Can someone tell me why these auto companies can't file Chapter 11 bankruptcy and reorganize? It's not like they didn't see this coming.

[KBecks]

Can someone tell me why these auto companies can't file Chapter 11 bankruptcy and reorganize? It's not like they didn't see this coming.

Here's an article I still need to read.
http://www.tnr.com/politics/story.html?id=a4893b49-36df-4784-9859-2dfa3a3211bf

Here's another article that appears to support the bailout that links to other articles that don't
http://www.slate.com/id/2204582/

Learning a little about Chapter 11 v Chapter 7, it seems offering a package to help automakers transition through Chapter 11 could be an option worth considering.

[KBecks]

I'm not convinced when people say how American cars are so terrible compared to foreign car brands. In my experience, American cars are competitive. GM still sells a lot of cars.

My FIL's old Impala drives comparably well to our old Acura. I was surprised by how well it drove compared to our car.

DH had a little Chevy rental a few weeks ago that was a very nice little new car. I don't know the model but it was small, and it had a lot of features and was nice. I liked it a lot.

If we were to look at new cars today, I would look at a Pontiac G6, which I've heard is very fun to drive and a great value. I also liked the Chrysler minivans when we were van shopping.

The owner of the company I work for drives GMC SUVs and they are very very nice vehicles.

I don't think it's a product problem overall. There are clearly many domestic vehicle models that are good sellers and that should survive and continue to be produced.

[Georgia]

Here's an intersting "how we got in this mess" article by Malcolm Gladwell from two years ago. The most interesting part is that back in 1950 the leader of the UAW was initially against company provided health insurance and pensions. He thought it was too risky to have workers relying on single companies for this coverage and wanted it handled across the entire union. The president of GM at the time pushed for it because he thought letting the union handle it themselves gave them too much power.

http://www.gladwell.com/2006/2006_08_28_a_risk.html

The system has reached an unsustainable point with too many pensioners to support on too little profit. American manufacturers have an increasingly difficult time competing against foreign companies where these safety nets are provided by the government and risk is spread across the entire country rather than within specific industries and companies that are subject to all sorts of cyclical upturns and downturns.

It seems to fit the American free enterprise ideal to have a system of mostly company-provided rather than government-provided healthcare and retirement benefits, but I think most Americans also find it very hard to stomach the type of devastation that can arise when company safety nets fall through on such a large scale as this. It's a terrible bind and in theory I'm against propping up one or three companies when I believe we should be helping the people themselves rather than a failed business model. What I find lacking in the anti-bailout arguments is a realistic way to do that. I find most anti-bailout people to also be anti-government provided safety nets.

[mongo]

WHAT are you talking about?

Um, how are people in Detroit metro supposed to sell their homes and move when there is ALREADY a 2+ year glut of houses on the market? My ILs own their home in Detroit metro (neither is directly connected to the auto industry), but couldn't sell unless they did a fire sale of $100K for their $400K home. And even then, they may not even be able to sell it and might have to just walk away from it. These are not auto workers, FIL is a pharmacist (still working 60 hour a week shifts at CVS at age 78 because he can't afford to retire) and MIL was a teacher in the Detroit schools for 30 years.

This is a disaster in the making for Detroit and Michigan that is going to make Katrina's effect on New Orleans look like a gentle summer rain.



Ah yes, and all these MBAs on our deregulated Wall Street did such a good job.....oh wait, never mind.

Were the people with the $400k homes complaining when they were profiting by flipping their homes every 4 years on ARM's? You can't have it both ways. Two wrongs don't make a right.

What I'm saying is that those folks in Michigan are in a catch 22. They either have to cut their losses or lose more. Do you wait for cancer to spread to avoid the inevitable pain and agony that comes with treatment, or do you cut it out to save the rest. It seems that people believe the disease is better than the cure.

[egoldber]

Were the people with the $400k homes complaining when they were profiting by flipping their homes every 4 years on ARM's? You can't have it both ways. Two wrongs don't make a right.

Sorry, I know I said I was out, but this I want to address.

It isn't just people flipping their houses on ARMs being affected. My ILs bought their home in 1980. They PAID IT OFF IN FULL by working diligently and saving their money like you're "supposed" to. It is NOT just people who made poor loan choices who are being affected by this.

[KBecks]

The system has reached an unsustainable point with too many pensioners to support on too little profit. American manufacturers have an increasingly difficult time competing against foreign companies where these safety nets are provided by the government and risk is spread across the entire country rather than within specific industries and companies that are subject to all sorts of cyclical upturns and downturns.


Aren't we talking about cars made in the US including Kias and Hyundais, Hondas and Toyotas, all mostly assembled in the US. It seems to be even except for unions.

ETA: A lot of manufacturing is happening in China and Mexico, etc. I'm not very sure about what kinds of safety nets are available there. I don't believe Europe is our biggest competition.

[JoyNChrist]

Sorry, I know I said I was out, but this I want to address.

It isn't just people flipping their houses on ARMs being affected. My ILs bought their home in 1980. They PAID IT OFF IN FULL by working diligently and saving their money like you're "supposed" to. It is NOT just people who made poor loan choices who are being affected by this.

What she said!

Goodness, I don't even know anyone in Michigan or anyone who works in the auto/supply industry, but that comment was a little much. It's not just corrupt CEO's, or money-hungry unions, or people who've squandered their savings who are in need of assistance. I imagine that there are a whole lot of good, honest, hardworking people who have made intelligent decisions and managed their money well, who through no fault of their own are now facing catastrophe.

While I don't know if the bailout is the answer, and while I realize that some painful changes are inevitable, I do think we ought to sympathize with the hardworking Americans who are having the rug pulled out from under them even though they did all the "right" things to protect their homes and jobs and retirements.

[MelissaTC]

What she said!

Goodness, I don't even know anyone in Michigan or anyone who works in the auto/supply industry, but that comment was a little much. It's not just corrupt CEO's, or money-hungry unions, or people who've squandered their savings who are in need of assistance. I imagine that there are a whole lot of good, honest, hardworking people who have made intelligent decisions and managed their money well, who through no fault of their own are now facing catastrophe.

While I don't know if the bailout is the answer, and while I realize that some painful changes are inevitable, I do think we ought to sympathize with the hardworking Americans who are having the rug pulled out from under them even though they did all the "right" things to protect their homes and jobs and retirements.

ITA. If the auto industry goes down, we have a HUGE mess on our hands. I don't know what the answer is but I would hate for things to get worse for people who have done nothing wrong. It is frightening and will affect all of us in one way or another.

[Georgia]

Aren't we talking about cars made in the US including Kias and Hyundais, Hondas and Toyotas, all mostly assembled in the US. It seems to be even except for unions.

The biggest difference between the big three US automakers and the foreign companies operating within the US is not the unions but the number of retirees they're carrying. From the article: "the obligations of G.M., with its four hundred and fifty-three thousand retirees, and the American manufacturing operations of Toyota, with a mere two hundred and fifty-eight retirees." Not sure how accurate the numbers are at this point but that's a huge difference.


ETA: A lot of manufacturing is happening in China and Mexico, etc. I'm not very sure about what kinds of safety nets are available there. I don't believe Europe is our biggest competition.

I'm not sure either and not talking specifically about the auto industry here, but in general developing countries have a much higher ratio of young workers to retirees, so it's easier to provide for people who have aged out of the workforce. More people are paying into the system than are trying to get money out of it. That's why these pensions looked like such a good idea in the babyboom post WWII US. Countries in Europe have the same aging population problems that the US does but have the safety nets in place.

[infocrazy]

Were the people with the $400k homes complaining when they were profiting by flipping their homes every 4 years on ARM's? You can't have it both ways. Two wrongs don't make a right.

What I'm saying is that those folks in Michigan are in a catch 22. They either have to cut their losses or lose more. Do you wait for cancer to spread to avoid the inevitable pain and agony that comes with treatment, or do you cut it out to save the rest. It seems that people believe the disease is better than the cure.

I'm sure I'm sensitive here since I do live in Michigan, although not directly affiliated with the Auto industry, but I was so insulted by these statements that I actually looked you up to see if you were only on BBB for drama! I don't think you are, now, but really--try to remember that REAL people are being affected here. Good, hard working people, who pay their bills, have excellent credit scores, have worked long careers and couldn't sell their homes for an INCREDIBLE loss if they wanted to!

[niccig]

It isn't just people flipping their houses on ARMs being affected. My ILs bought their home in 1980. They PAID IT OFF IN FULL by working diligently and saving their money like you're "supposed" to. It is NOT just people who made poor loan choices who are being affected by this.

Same with my ILs. Both worked in healthcare. Their house was appraised for less than what they bought it for 15 years ago. They're OK for now, but as they are retired they have a fixed income. We expect we'll need to help them out, like Beth helps her mother.

[lovin2shop]

Georgia & KBecks, thanks for linking the articles. The Malcolm Gladwell was especially interesting, gave me a lot to think about.

[lovin2shop]

After thinking on this issue for awhile, what I come back to is solving the credit crunch. Although the auto industry has it's own inherent problems, there would not be an outright crisis right now if it weren't for the credit crunch. It has hit the big three with a perfect storm of inability to borrow (even normal day to day trading of commercial paper that all companies participate in), a complete wipe out of customer demand from the recession, and a dramatic decrease in pension assets from the slide of the stock market. If the Treasury can get the credit markets stabilized, then it will give the auto industry so many more options for revival or worst case make Chapter 11 vs. 7 possible. I think that there will have to be some government help to get them through this critical time, but if you can get the banks back to lending then it will limit the devastation and amount of a total bailout of the companies or all their employees.

[kusumat]

I do not think the bailout is the answer. CEO and management of those companies should take responsibilties by taking paycut, no bonus, no severence package. I used to work in the finance area of a fortune 500 company. I was there for 5 yrs and the layoffs happened almost every year. Still, the CEO and executives paid themselves huge bonus($250K up).

I also think that CEO is an overpaid job (40 times of average employees' salary at that company). On the top of that, they have luxury company cars, forgiven loans(That's right! The company gave them loan for free) and etc. It is also ridiculous that they got insanely severence paid to leave(I have seen $20 millions).

The government should regulate the compensation of CEO and management and also make them take financial responsibilies on their poor management.

Why can't they be like the Costco's CEO?

[lovin2shop]

I do not think the bailout is the answer. CEO and management of those companies should take responsibilties by taking paycut, no bonus, no severence package. I used to work in the finance area of a fortune 500 company. I was there for 5 yrs and the layoffs happened almost every year. Still, the CEO and executives paid themselves huge bonus($250K up).

I also think that CEO is an overpaid job (40 times of average employees' salary at that company). On the top of that, they have luxury company cars, forgiven loans(That's right! The company gave them loan for free) and etc. It is also ridiculous that they got insanely severence paid to leave(I have seen $20 millions).

The government should regulate the compensation of CEO and management and also make them take financial responsibilies on their poor management.

Why can't they be like the Costco's CEO?

I don't think that anyone is going to disagree with you on the issue egregious CEO pay. But, you could take away all pay and benefits for all the C titles at the big three and it still wouldn't even come close to putting a dent in what is needed to keep them afloat.

[kusumat]

I don't think that anyone is going to disagree with you on the issue egregious CEO pay. But, you could take away all pay and benefits for all the C titles at the big three and it still wouldn't even come close to putting a dent in what is needed to keep them afloat.


I am not only talking about their current paycheck. How's about what they have earned since they worked for the company. Those should include top executives as well.

It is true that it is not going to add up what the companies need. But, who gets the companies in this position? They did. I recalled seeing an ads from Obama during the last week of election mentioning that he was not going to let top executives get away from their mistake. I guess he might not be able to do much during the transition?

At least the bailout amount will be less.

[lovin2shop]

I am not only talking about their current paycheck. How's about what they have earned since they worked for the company. Those should include top executives as well.

It is true that it is not going to add up what the companies need. But, who gets the companies in this position? They did. I recalled seeing an ads from Obama during the last week of election mentioning that he was not going to let top executives get away from their mistake. I guess he might not be able to do much during the transition?

At least the bailout amount will be less.

The idea of employees/executives of private companies being forced to pay back earnings, no matter how high they are, does not sit well with me. They had contacts that were approved by the board, and disclosed and voted on by the shareholders. Reform going forward, yes. But, taking back paid earnings seems like a dangerous precedent. Now, if they decide to pay it back based on their own convictions like some have, then I applaud them.